House Prices falling at 9.5%: Don’t Buy Now!


No place left at the bar ?
Creative Commons License photo credit: Lionoche

1 September 2011

MELBOURNE:- The RP Data‐Rismark July Hedonic Home Value Index released yesterday confirms house prices are falling at an annualized 9.5 per cent.

“The new downward trend in house prices is firmly established and will proceed rapidly from here,” Prosper Australia Campaign Manager David Collyer said today.

The RP Data index shows the eight capitals overall are down 1.5 per cent QoQ. That is an annualized rate of almost 6 per cent. Meanwhile, the ABS says inflation is running at an annual 3.6 per cent, so the current pulse across the eight capitals is about -9.5 per cent per annum in real terms.

Prosper Australia called the bursting of the bubble on April 15 this year.

“The boosters and spruikers of the property industry have suddenly flipped to a new narrative, that this modest change makes real estate a ‘buyers market’.

“Their claim is misleading and deceptive. They should hang their heads in shame,” Collyer said. “This self-serving argument is an attempt to coerce innocent buyers to commit to a lifetime of debt at the very peak of The Great Australian Land Bubble.

“Prosper sees no reason why young Australians should pay grossly inflated prices for homes just so vendors can crystallize their gains and exit with their wealth intact.

Prosper Australia’s Home Buyers Strike and repeated warning – Don’t Buy Now! – addresses prospective home buyers trying to negotiate the traps and pit-falls on the road to home ownership.

House prices have a very long way to fall to become attractive. House prices at three times a buyer’s income is a neutral market and at 2.5 times is a buyers market. Prosper expects to see these prices in about five or six years.

“A third of adults rent. While not every renter aspires to home ownership, all are excluded by high land prices. This is an abuse of the idea of citizenship in a property-owning democracy and Australia’s profound national commitment to opportunity for all.

“We expect the RBA to cut interest rates firmly in coming months. However, a zero interest rate policy is impossible with Australia’s concurrent mining boom.

“The federal government has no further market interventions available. A fresh first home buyers’ grant would be met by derisive howls from young adults. They have learned such trickery merely inflates prices by at least the size of the grant, and goes straight into the pockets of vendors.

“We take no joy in the widespread economic destruction the bursting of the bubble will bring. The villain in this drama is the tax system, a scheme that advantages land speculation over genuine investment and wage-earning.” ENDS

Media comment: David Collyer david.collyer@prosper.org.au

About Prosper: Prosper Australia is a tax reform lobby group and think tank that is now 120 years old. It seeks to move the base of government revenues from taxing individuals and enterprise to capturing the economic rents of the natural endowment, notably through Land Value Tax and Mining Tax.

6 Comments

  1. Forrest Gump03-09-2011

    Our home buyers market hsa been hijacked by poor taxation laws such as negative gearing and stimulus programs such as the FHBG.

    Before the next election, I would like to see Prosper ask each political party where it stands in relation to these 2 issues and if they would consider removing them (or at least reducing their impact). There are many political agendas, but I see these 2 issues as critical election issues of which will swing my vote.

    I will vote for the party that removes all home buyers grants and/or dismantles negative gearing.

  2. liam o aceiad05-09-2011

    im from ireland the land of a 1000 ghost estates and millions of sq feet of empty office, retail space.the government waltzed us into a fatal embrace with the banks and ordinary people are being forced to bail out these polecats in suits. start worring when you hear aussie govenrment ministers make utterances about the economic “fundementals” being sound, then start dropping phrases like ” corrections” and “tough decisions”your banks are f_cked.and their going to make sure you are too.

  3. Andrew05-09-2011

    There is no reason to use inflation to multiply the price reduction percentage. It is misleading and a negative spruik spin tactic. Don’t resort to the same low tactics as the price boosting spruikers.

    It’s more complex than you suggest anyhow. Wage inflation may increase the quantum of loan a buyer may get, but price inflation erodes his discretionary income. How that makes the house price more affordable is not so clear to me.

    If a wealthy buyer has 100% cash then it is the return on his investment (not CPI) that increases his purchasing power. There are few buyers in this position.

  4. Riley Chandler04-10-2011

    The property market has been unsustainable for a long time, people no realise this thankgod. The worlds debt has attributed from agents and banks tricking people into thinking they wont get another chance to buy again unless familes do it now. It was the worlds biggest scam.
    Swan brought the market time by boosting the FHOG. But didn’t realise it made it worse, It only brought the time needed for people to realise that their wages weren’t going up to compensate for the massive amount of debt they had gotten into.

    It’s going to drop no matter how much everyone tries to stop it because our wages cannot rise due to us having to stay competitive in the world labour markets. hahaha I laugh at those greedy investors losing their money on both the stock and property markets.

    Regards,

  5. jay15-02-2012

    bursting of the bubble?, remove FHOG and negative gearing?. All these are very negative statements probably stemming from a hidden agenda. Australia will never be in the same Sh_t as ireland. Australia doesnt have the euro to contend with and can set it’s own monetary policy to control house prices, australian banks are extremely strong, and not in to risky lending practices like some european banks, Government debt is very small compared to most european countries. Australia is immigration country. all these people coming to country can’t be expected to live in tents.
    The current slump in house prices is artificially created by the fear factor and the doomsday prophets. I work as a home lender in a major bank in australia and i can tell you that there are so many buyers in the market, but everyone is holding off at the moment waiting for that great bargain which is just round the corner. but if everyone thinks like that somethings gotto to give, and prices can only move upwards.

  6. Ben11-01-2013

    I have decided not to buy a house in Australia. They are not afforable at current levels. Yes I am sitting on six figures in the bank but houses are not worth the money being asked so I won’t buy. I am not willing to live miles from a capital city and spend all my time in traffic. I am also not willing to spend my life living in a shoe box.

    If more people make the same decision as me then we may become like Germany or other European countries where houses might become affordable again in around 20 years again. Many people might choose to rent until houses reach affordable levels again.

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